Residential treatment billing for SUD and mental health programs.

A residential day is billed as a per diem: one flat payment for a day of stay and treatment, not a bill for each service. There is no national rulebook for it. A 2021 report from ASPE, the policy office at HHS, says residential mental health and substance use settings are governed almost exclusively by state statutes and regulations, not federal law. So the code, the claim form and the authorization rule come from the state Medicaid agency, the managed care plan or the commercial contract, not from a national manual.

Medicaid and the 16-bed rule. Federal regulation defines an institution for mental diseases, an IMD, as a hospital, nursing facility or other institution of more than 16 beds that is primarily engaged in providing diagnosis, treatment or care of persons with mental diseases. The test is the institution's overall character, whether or not it is licensed that way. Federal Medicaid money is not available for a person under 65 who is a patient in an IMD, unless the person is under 22 and receiving inpatient psychiatric services. CMS wrote in 2017 that residential substance use treatment is ordinarily not eligible for federal Medicaid payment for that reason.

States have two ways around it. The first is a section 1115 demonstration. A 2017 CMS letter offered states federal matching money for services in residential substance use IMDs, and a 2018 letter did the same for adults with serious mental illness and children with serious emotional disturbance. Both letters point to a statewide average stay of 30 days, and both say the money does not pay room and board unless the facility qualifies as an inpatient facility. The 2017 letter also asks states to hold residential providers to ASAM or another nationally recognized standard. The second is managed care. A plan can be paid a monthly capitation for an enrollee aged 21 to 64 in an IMD only if the facility is a hospital or a sub-acute facility providing crisis residential services, and only for a stay of no more than 15 days in that month.

For your claim, that means whether Medicaid pays for an adult day in a large program depends on your state's authority, and you should find out before the first admission. Nevada, for one, lists residential substance use treatment in an IMD as its own provider specialty, and it requires prior authorization for its residential codes.

Under 21, for mental health. Federal rules give youth psychiatric residential care its own Medicaid benefit. A psychiatric residential treatment facility, a PRTF, is a facility other than a hospital that provides psychiatric services to people under 21 in an inpatient setting. It has to be accredited by the Joint Commission, CARF, the Council on Accreditation or another accreditor the state recognizes. A team has to certify in writing that community care does not meet the youth's needs, that proper treatment requires inpatient services under a physician's direction, and that the services can reasonably be expected to improve the youth's condition or prevent further regression. The facility also has to follow the federal restraint and seclusion rules.

Medicare. Medicare pays for inpatient psychiatric care through hospitals: psychiatric hospitals and psychiatric units of general hospitals. In a freestanding psychiatric hospital there is a 190-day lifetime limit. Its national coverage determination for drug abuse treatment covers inpatient hospital care and hospital outpatient department services. We found no Medicare benefit for a residential program that is not a hospital, so confirm a patient's coverage before you admit. Medicare does cover partial hospitalization and intensive outpatient programs.

Commercial insurance. A commercial plan pays residential days under the facility's contract with the plan. Tufts Health Plan's payment policy, for one, lists residential and detox services as a per diem, one unit a day. The contract holds the rate, the level-of-care definitions, what the per diem includes and how many days are approved at a time, and no public document replaces it. Optum shows how much rides on it. It says its Fourth Edition ASAM changes are not effective for a facility until the facility has a fully executed, updated contract, that until then the facility should follow the Third Edition, and that it sends an updated contract reflecting each level of care, which the facility signs and returns with a new service addendum and payment appendix.

For substance use, the levels come from ASAM, the American Society of Addiction Medicine. Its Fourth Edition, released in 2023, calls Level 3.1 Clinically Managed Low-Intensity Residential Treatment and Level 3.5 Clinically Managed High-Intensity Residential Treatment, and it treats Level 3.7 as medically managed residential care. ASAM says a patient can receive Level 3.7 in a hospital, though most 3.7 programs are residential.

The Fourth Edition folded the Third Edition's separate withdrawal management levels into the main levels: 3.2-WM into 3.5 and 3.7-WM into 3.7. ASAM's own assessment guide lists 3.1, 3.5 and 3.7 as the residential levels and does not list 3.3, but Ohio, Oklahoma, Iowa and New Mexico still write rules around 3.3. ASAM is not a regulator. Its FAQ says public agencies and payers decide if and when they use the Fourth Edition, so a state's rules and a payer's contract can be on different editions at the same time.

Mental health residential care has no single national level system. Some states level it themselves. New Mexico, for example, organizes adult mental health residential care into three tiers under LOCUS Level 5, medically monitored residential services. Elsewhere, look to the payer's manual or contract for the criteria it applies. For youth, the federal PRTF rules above are the frame.

For a claim, the level is not one fact. It is the level your license allows, the level the patient was assessed at, the level the payer authorized and the level on the claim. Oklahoma wants the ASAM placement tool completed no more than seven days before an admission or an extension request. Washington's section 1115 waiver requires an independent assessment from an outpatient provider, who decides whether the patient meets the ASAM residential level. New Mexico requires concurrent authorization before a member moves to a different level of care than the one admitted to.

A new residential program needs four things, and the order and the details are your state's: a state license or certification, accreditation where it is required, Medicaid enrollment, and a contract with each plan you want to bill.

License and accreditation. Ohio requires certification by its Department of Behavioral Health for residential and withdrawal management substance use services, and a Medicaid specialty for SUD residential facilities under provider type 95, before a program can bill the residential benefit. Oklahoma requires certification from its mental health and substance abuse services department as a residential level of care provider, a contract with its Medicaid agency, and current accreditation from the Joint Commission, CARF or the Council on Accreditation. New Mexico requires accreditation from the same three bodies plus certification from its Behavioral Health Services Division, renewed every two years with a site visit. Iowa requires an active state license for the level of care and lists the Medicaid provider types that can bill each code.

Medicaid enrollment and the plans. Enrolling with the state Medicaid agency is separate from contracting with each managed care plan, and every plan decides for itself. Nevada tells its youth psychiatric facilities that contracting with the managed care organizations is the provider's responsibility. Virginia tells them to become credentialed and contracted with the youth's plan, or negotiate out-of-network, to be paid for the services the plan covers.

A voluntary credential. CARF runs ASAM's level of care certification for adult residential programs at Levels 3.1, 3.5 and 3.7. Optum calls it preferred but not required, and says certified programs are prioritized when it contracts under the Fourth Edition.

These are codes that payers and state agencies print for residential claims. Rates change and differ by payer, so this page leaves them out. The unit for all of them is the day. Any chart that pairs one code with one ASAM level is describing one payer's setup, not a national rule.

Counting the day is its own rule. Nevada puts the discharge date on the claim and does not pay it. Ohio requires at least one documented face-to-face service at the program site before a residential per diem can be billed. Indiana reimburses PRTF leave days at half the per diem when its conditions are met.

A per diem bundles the day. What sits inside the bundle is set by the payer, and it decides what else you can bill on the same day. Room and board is the first question. CMS says the Medicaid statute does not list room and board as a separate benefit, and that its rules count room and board as part of inpatient care. That is why its section 1115 letters do not pay room and board in residential facilities unless they qualify as inpatient. States fill the gap in different ways. Ohio's per diems do not include room and board. Washington pays it on H2036 with state-only funds. New Mexico pays a fixed daily amount for room and board from state general funds under H0047, only for programs billing Medicaid fee for service, not for managed care. A youth PRTF is the opposite case: Nevada's all-inclusive daily rate includes room and board.

Then there is everything else the patient gets that day.

For commercial per diems, the contract says what is inside. Read it before you bill any line beside the per diem.

Prior authorization approves the admission. Utilization review is the payer's check that the stay is medically necessary. Concurrent review is that check made while the patient is in the bed: the payer approves a number of days, and your team asks for more, with the clinical record, before those days run out. ASAM's own text says patients should be reassessed regularly and its transition and continued service criteria applied to decide whether they stay at a level or move.

For Medicaid managed care, federal rules say a state's time frame for a standard authorization decision may not exceed 7 calendar days for rating periods that start on or after January 1, 2026, and that an expedited decision is due within 72 hours. Either can be extended by up to 14 days in the ways the rule allows.

For a group health plan under ERISA's claims rule, two lines matter to residential care. A plan that reduces or ends an approved course of treatment before its approved period is over has made an adverse benefit determination, and it has to notify the patient early enough to appeal before the benefit stops. And a request to extend treatment that is an urgent care claim must be decided within 24 hours, if it reaches the plan at least 24 hours before the approved days run out.

States and plans add their own rules on top.

In every case below the care was delivered and the claim still failed.

HRI runs residential billing under HRI Managed. That means benefit verification before the bed is filled, authorization and concurrent review tracked to the date, and claims built to the payer's code set for the level of care before they go out. It also means a running check of days in your census against days authorized, days billed and days paid, by payer, so a gap shows up in the week it opens. A denied or stuck claim runs through the same seven-point diagnostic we apply to every claim. Every claim is reported to you every Friday, with its status, its age and the next action.

License, certification and accreditation decide when you can enroll, so start there. We prepare the Medicaid enrollment and plan contract requests and track each one to a decision. Before the first day is billed we also confirm with the state whether the program is paid as an IMD or under a youth PRTF benefit, and which code set and claim form apply. One rule is fixed: no claim goes to a payer until that payer confirms enrollment and an effective date. The order of work, what to have ready and the first 90 days are on the new-program billing page.

Residential billing is priced the same way as the rest of our billing, by who pays the claim. Any residential day a state Medicaid program pays, in whole or in part, directly or through a managed care plan, carries a flat fee per claim, set per program day or per encounter where that fits, with a monthly minimum. The Medicaid fee is never a percentage of what is billed or collected, and it is owed whether or not the claim pays. Commercial insurance and Medicare claims carry a monthly minimum or a percentage of what payers pay, whichever is greater, never both. Every rate is fixed in writing before the first claim. Payers pay you directly, and we never receive payer money. Ending the agreement early outside its own exit terms carries an early-exit fee, set in the agreement. There is no setup fee when your operation is ready as it stands. Credentialing and enrollment work is priced separately, per service, in writing.

On Medicaid residential claims, your fee follows the claims we file, not what payers pay. Your exact numbers are set on a written quote after a billing review.